You make good points.  When I was thinking of "block" I was only thinking of not letting them see your stuff.  I was not thinking about people wanting to control who can reply and in particular what their friends see underneath their post (which some people worry reflects on them). But that is a hard problem in a decentralized space, and muting can actually solve it if (as you suggest) people can see who other people mute and clients make this known, and people can borrow mutes from other people too. 

 Not only is it "a hard problem" and "not what you were thinking of", it's also a bad idea (for a social networking client). 

Maybe for a personal blog or something it would make sense for a client to not show notes inline that reference the original post. But I'm not convinced a relayed-note protocol is even the right choice for a personal blog anyway.